Gas line projected to generate thousands of in-state jobs

Alaska Gasline Development Corp. CEO Dan Fauske provided figures estimating a major impact to Alaska if the proposed in-state gas pipeline is built.

“It will be the largest project in North America. It will supply 8,000 direct and 15,000 indirect jobs,” Fauske said Nov. 9 in a presentation to the Associated General Contractors of Alaska annual conference.

The numbers expand on those in the final environmental impact statement released Oct. 26. The estimated $7.52 billion construction cost will involve moving 10 million cubic yards of soil, assembling 335,000 tons of pipe and 4 million miles of truck travel to transport equipment and supplies, according to ADGC statistics.

As previously reported, the 24-inch diameter pipeline will stretch 737 miles from Prudhoe Bay to an extraction plant on the northern edge of Cook Inlet.

In his presentation, Fauske added that state regulation requires an additional facility to be built at mile 458 of the pipeline. That’s where a 12-inch lateral line is planned to supply Fairbanks.

“We must build what’s called a straddle plant to pull impurities, or those rich natural gas liquids out and you must ship utility grade gas down the line.” Fauske said.

A straddle plant will cost $250 million and be paid in a tariff charged to gas customers in Fairbanks. While some in the city aren’t happy with the expenditure, Fauske said the status quo will not hold.

“Fairbanks is in an absolutely chaotic economic situation in terms of energy cost,” he said. “You have people paying more for their monthly heating bill in the dead of winter than for their mortgage payment.”

AGDC projects the Fairbanks tariff to be $10.45 per million Btu worth of gas. Current tariffs for gas trucked to Fairbanks are in the $23 range, Fauske noted. An Anchorage tariff is expected to be slightly lower simply because of dispersal over a larger population.

“You’re going to pay $9.63 (in Anchorage) after you built a $7.5 billion pipeline, put thousands of people to work, and secured energy for the next hundred years and your energy prices are going up less than a buck. That’s pretty impressive,” Fauske said.

The tariff for gas from Cook Inlet, he said, is in the $8 range right now.

A project timeline provided by ADGC forecasts engineering, financing and permitting to continue for several years. Construction is expected to begin in early 2016, with the first gas reaching Fairbanks in late 2018 and a full flow of 500 million cubic feet of gas per day to Cook Inlet beginning in 2019.

The state of Alaska will be expected to cover the first $400 million in design and permitting costs. Fauske said the costs up front will be recovered through gas taxes and royalty fees.

With gas supplies from Cook Inlet dwindling and shortages expected as soon as 2014, Fauske made his feelings about the importance of the gas line clear.

“I joke in speeches we’re going to be in our basements burning our Permanent Fund checks to stay warm,” he said. “I don’t care what project we do, I just want a project.”

He added that the in-state line is not meant to compete against the idea of a much larger commercial export pipeline. It is meant to supply Alaska with its gas needs. If a second gas pipeline is built in the future, Fauske said, it will be done by large oil and gas companies, not by the state. Costs for a 48-inch export line are estimated to be $45 billion to $60 billion.

“If in their work they determine that someday, tomorrow or maybe 50 years from now, it makes sense for them to spend that kind of money to ship gas to either the west coast of the United States or the Far East, they’ll do it,” he said.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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